Kelvin believes that the volatility of a stock is higher than what is indicated by the market prices for option on that stock. He wants to speculate on that belief by buying or selling some European options with strike prices close to the current stock price. Which of the following strategies would achieve Kelvin's goal?

• Buy a strangle: buy a call with K2 and buy a put with K1 (K2 > K1)
• Buy a straddle: buy a call with K and buy a put with K
• Buy a butterfly spread: buy a call with K1 and buy a call with K3, sell two calls with K2
• (K2 is halfway between K1 and K3)
• In your answer, please make reference to the graph of each strategy.